Foreign Incentives Help Crush Once-Booming F/X Biz in U.S.

While L.A.'s visual effects business may not be entirely lifeless, it's certainly bleeding out

At the recent Siggraph conference in Anaheim, there were not one but two panels on the state of the vfx industry. Word on the street was that feature effects production is dead in L.A., so at times those sessions felt like a public inquest into a murder.

While the city’s vfx business may not be entirely lifeless, it’s certainly bleeding out. It was severely wounded by several factors: failure to organize when it could; globalization; low labor costs abroad; and most of all, foreign subsidies. Chances are it will survive only as a much-weakened remnant.

It’s easy to blame the invisible hand of the market and the creative destruction that is capitalism. But markets are influenced by government policies both abroad and at home.

Overseas, government tax incentives and subsidies have distorted the playing field, propping up companies that wouldn’t have been able to compete without government help and imposing strains on American firms whose governments don’t offer the same support.

At home, decades of economic policy influenced by acolytes of Ayn Rand’s fantasy novels — from Alan Greenspan to Paul Ryan — produced booms, bubbles and busts that delivered high unemployment and record corporate profits — a perfect climate for reducing the clout of labor and workers.

Visual effects is the one key piece of filmed-entertainment production that operates under the Randian free-for-all that those economic sages prescribe for America’s greater prosperity. Until around 10 years ago, vfx artists and their skills were relatively scarce, so their jobs tended to be permanent and lucrative. When IATSE tried to organize Sony Imageworks in the boom years, almost none of the company’s employees voted to unionize. That mindset held across the industry — and proved short-sighted. The major studios never had to become guild signatories for visual effects artists as they are for actors, directors and other specialties. They remained free to use f/x made anywhere, under any working conditions. And so they do. As a result, downwardly mobile SoCal vfx artists — the canary in the coal mine for the rest of L.A.’s production pros — are learning to their terror just how much they have in common with laid-off machinists in Milwaukee.

L.A. vfx companies and artists were once protected by the high barriers of entry to their field. But those barriers fell, and then government subsidies abroad set the Los Angeles vfx industry on a path to ruin. With the help of local incentives, New Zealand-based Weta Digital produced the award-winning vfx for New Line’s “Lord of the Rings” trilogy. New Line’s parent, Warner Bros., took its tentpole movie vfx work to the U.K. to cash in on local incentives. Warner’s spending built London into the global capital for vfx in just a few years.

Other territories enacted their own tax incentives. Some repealed them after they proved to be of no benefit to the local economy, but studio lobbyists always seem to be able to find pols who can be seduced by the promise of high-tech jobs with a sheen of Hollywood glamour.

One of the two Siggraph panels focused on unionization, the other on the idea of using World Trade Organization treaties to impose duties on vfx created abroad and “imported” back into the U.S. Both paths appear slow, perilous and uncertain, but feature vfx pros in Hollywood know the prize is already lost, and winning it back will take time, toil and sweat.